“There’s a quality of life in Maine which is this singular and unique. I think. It’s absolutely a world onto itself.”
– Jamie Wyeth
November 1, 2024— There are no hills. Lots of lakes and pine trees.
Maine occupies a strange location in US history. Both on the map and in the Electoral College.
Most of my family has been going big to a cabin on Penobscot Pond, west of Moosehead Lake, since 1912.
Some wise old fool though it would be a good idea to separate ourselves from civilization a couple times a year. Legend has it he rented the cabin from the paper giant Plum Creek for 100 years for $1.
New England is comfortably numb with these kinds of tales.
No matter.
There is no electricity. Cell reception drops out except for a rise in the road about halfway between Kokadjo and the pond.
Our side of the family doesn’t visit often. But if there’s a better place to wait out the election, I’d appreciate it if you let me know.
As I go off-grid, Trump is way ahead on the betting sites.
That said, Maine splits its electoral college votes, so it will likely be a “purple” state like the prairie haven, Nebraska.
On Tuesday, we buttoned our investment strategy with the Grey Swan Election Roundtable and Wealth Building Building Forecast for 2025.
If you’re a fully paid up member of the fraternity you’ll have complete access.
A rundown:
We heard from John Robb on networked warfare – including elections as a form of tribal warfare. And a stark analysis of a potential multi front global war.
John Rubino analyzed the factors that could make for a close election this year. But only as a form of entertainment that has gripped us as much as the minute from Federal Reserve meetings do.
Canadian Mark Jeftovic focused on the opportunity in bitcoin no matter who wins. He’s a gold bug, he assured us, but arrives in the Bitcoin camp with a similar mistrust of fiat currencies.
Shad Marquitz discussed how commodities are on track for strong performance. Shad knows a bit more about copper, its mines, industrial uses and supply chains, than… anyone.
Andrew Packer discussed how these different ideas tie into various Grey Swan themes. What we found most intriguing with Andrew’s perspective is how he straddles, connects mainstream financial press and obsession with the indices, with our patient and thoughtful investment strategy. It’s a skill.
The whole roundtable is worth the listen, both now before the election, and likely into the end of the year, given our forward look to 2025.
In the meantime, for a little Friday fun, here’s Grey Swan’s own Andrew Packer exploring an idea central to many Grey Swan themes. Enjoy – Addison
Why I Hedge with Gold and Bitcoin
Andrew Packer, Grey Swan Investment Fraternity
I’m thinking of starting a hedge fund. And I’d like to let you in on the ground floor.
No, seriously. No strings attached. In fact, you’ll be one of my clients. That’s not optional either. I may not be part of the government, but they’ve agreed to back me on this.
I’m talking about a true hedge fund, too. After all, the original idea of a hedge fund was to, well, hedge. To own positions that go against the traditional wisdom. Perhaps, even, to have capital on hand to take advantage of market opportunities.
In a way, a truly hedged fund would be balanced. Stable. And stability is a worthwhile goal, isn’t it? The opposite of stability is chaos. You’re not in favor of that, are you?
Now, hedge funds famously charge a “2 & 20” fee. That means they take 2% of your assets in the fund up front each year. Gotta pay the analysts and keep the lights on!
And 20% of the profits. It’s nice to get a bonus, isn’t it?
Sure, a truly hedged fund won’t make killer returns each year. So, the 2 & 20 fee is really a rip-off. But hedge funds that simply trade the market however they want, without really hedging, also fail to outperform the market over time.
So, instead of a 2 & 20 fee, I’ll charge an average of about 3.5% per year instead.
That sounds a lot fairer, doesn’t it? Of course, that’s just an average. Some years will be more. Some will be less. Ideally, I’d like to target a 2% annual fee. But things happen. It’s just the price of providing stability.
But don’t worry. While this fee is a bit more variable, but lower, I’ll make up for the losses on my end by ensuring that everyone has to pay it. Again, it’s not optional. Unless you live overseas… but even then, when markets get fearful, you’ll have no choice.
Even if you’re not directly using my fund, everyone should have to pay a small annual fee. After all, I’m looking to provide stability. Ultimately, that’s a small price to pay. Either way, I’m sure you won’t mind. You’re working, after all. The retired, newborn babies … they’re the ones who will be the worst impacted by this policy.
So, let’s talk returns. Frankly, the concept is overrated. Stability is what matters. With that end, most years I expect small gains. Don’t worry, I’ll take care of the taxes and make sure the U.S. Treasury gets their due.
But some years, I’ll have losses. My plan? Ignore them. I’ll just keep them on the balance sheet until they’re no longer losses. For assets like bonds, as long as I get paid, a short-term paper loss is no big deal. Even if it soars into the billions of dollars in losses or more.
In the end, with everyone in the country paying an average of 3% annually into my fund, losses really won’t matter.
Unfortunately, all the good names are taken. But Den of Vipers LLC looks like it’s still available. Shoutout to A. Jackson of Nashville, Tennessee for the idea.
Don’t Let this Hedge Fund Ruin Your Financial Future
Pretty genius idea, isn’t it? Thanks. I got it from an army of PhD experts on the economy.
You see, I’m just cribbing the idea from the ultimate “hedge” fund: The U.S. Federal Reserve.
The private bank (don’t let the .gov website or Senate approval for Fed Chairman fool you), is supposed to be the world’s lender of last resort. Thanks to that designation, it currently has losses of over $1.1 trillion on its balance sheet.
They’ve also had an exploding balance sheet every time there’s a crisis. And shrinking that balance sheet has been more theoretical than factual. A crisis tends to erupt when the bank moves too much towards shrinking its size by selling off assets.
As for that 3% fee… well, that’s just inflation, averaged over the past 50 years. It’s a bit higher than the Fed’s 2% target. But it hits everyone, working or retired, young or old.
That maybe why Andrew Jackson fought against a national bank, stating in 1834:
“You are a den of vipers. I intend to rout you out and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.”
If you wouldn’t take this offer as a prospective hedge fund investor, maybe you should look for assets outside of this system.
Gold meets that criteria, mostly. The Fed isn’t buying or selling the nation’s gold, although it is held on the bank’s books.
The U.S. government also holds bitcoin, seized through illegal activity. They’re gradually selling that stake off, but that could change next week if pro-bitcoin Donald Trump retakes office.
Both assets aren’t as subject to the whims of the Fed, which can wreak havoc on the economy by setting interest rates. By setting rates too high, they slow the economy into a recession. By setting rates too low, their usual policy, they help fuel bubbles in all sorts of assets.
This week, we’ve looked at gold, and to some extent bitcoin, for a variety of reasons.
The manipulations of the fiat system should be the first reason in your mind to own these assets outside of this system. And a key reason why gold and bitcoin prices can continue to rise in dollar terms. ~~ Andrew Packer, Grey Swan Investment Fraternity
So it goes,
Addison Wiggin,
Grey Swan
P.S. Satire has become a lost art in the written word. Andrew’s modest contribution here reveals another aspect of the Grey Swan Investment Fraternity: While we may look for unlikely events that can impact markets (usually adversely), we do so with a smirk, grin, and joy in our work.
Have a great weekend!
How did we get here? Find out in these riveting reads: Demise of the Dollar; Financial Reckoning Day; and Empire of Debt — all three books are now available in their third post-pandemic editions. You might enjoy one or all three.
